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In-s [12.5K]
3 years ago
7

Company X has 2 million shares of common stock outstanding with a book value of $2 per share. The stock trades for $3 per share.

It also has $2 million in face value of debt that trades at 90% of face value. What is the debt ratio that should be used to calculate WACC
Business
1 answer:
gladu [14]3 years ago
4 0

Answer:

23.08%

Explanation:

The computation of the debt ratio is shown below:

Debt amount

= 2 million × 0.90

= 1.80 million

And,

Equity amount

= 2 million × 3

= 6 million

Now

debt ratio = debt amount  ÷ (amount of debt + amount of equity)

= 1.80 million ÷ ( 6 million + 1.80 million)

= 23.08%

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Answer:

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Answer:

Advantages of a Joint Stock Company

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Perpetual succession is another advantage of a joint stock company. The death/retirement/insanity/etc does affect the life of a company. The only liquidation under the Companies Act will shut down a company.

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